Posted by: Josh Lehner | September 17, 2020

Oregon Poverty and Progress, 2019 Edition

This morning the Census Bureau released the 2019 American Community Survey data. Normally this is the Super Bowl of socioeconomic data, and researchers mine it for months to better understand where we stand. But pardon my lack of enthusiasm this morning given *gestures broadly at everything.* Census data is always backward looking but is very important to keep track of. That said it feels even more so this week given the pandemic, recession, and wildfires. And it’s a shame really because, as expected, the 2019 data looks fantastic. We knew the economy has doing quite well right up until the pandemic hit, and this fact actually makes economists more optimistic on the recovery given there were no large macroeconomic imbalances. With that, the charts below highlight some of the major data points in the 2019 ACS data. We will post more in the future as we dig further into the data.

First, median household incomes in Oregon and the nation hit new all-time highs last year. The decade-long economic expansion was really bearing fruit in recent years as the economy strengthened and wages began to rise significantly. Oregon’s median income now stands 2 percent higher than the U.S. This is a touch lower than in 2018 as incomes rose slightly slower in Oregon in 2019 than they did nationwide, 5.7 vs 6.1 percent. That said, outside of the past two years you have to go back to the 1960 Census to find median incomes in Oregon that were higher than in the nation.

The underlying driver of income growth last year was earnings (wages). Yes, the number of workers increased, boosting incomes somewhat. However earnings per worker, especially for full-time workers, really drove the gains. Given that middle- and lower-income households really only have wages as their source of income, these wage gains in recent years are driving incomes higher for Oregonians. While higher-income households have fared better in recent years (decades), incomes across the board in Oregon are now higher than they were prior to the Great Recession, even after adjusting for inflation.

And these income gains drive poverty figures lower. Oregon’s 11.4 percent poverty rate in 2019 is almost a full percentage point lower than the nation’s 12.3 percent. This gap between Oregon and the U.S. is on par with what the state saw in the 1990 and 2000 Census data. You have to go back even further, to the heyday of the timber industry in the 1960s and 1970s to find a time when Oregon’s poverty rate was proportionately lower than the U.S. than it is today.

The good news here is that these income gains and poverty declines are seen among Oregonians of all races and ethnicities. The racial poverty gap remains. There is more work to be done to address inequities. But the good news is the racial poverty gap is now the smallest on record in Oregon, and poverty rates for Black, Indigenous, and People of Color have never been lower*, based on available data. But this also means that BIPOC Oregonians now face poverty rates on par with what white Oregonians experienced during the worst of the Great Recession. Like I said, a lot more work to be done.

Note: We will have more in our forecast document next week on how COVID-19 may or may not be changing some of these trends.

All told, Oregon experienced a strong economic expansion last decade, among the best nationwide. Importantly the economic growth translated into money in the pockets of everyday Oregonians. Our incomes had never been higher, and our poverty rates hadn’t been this low in decades. But we are now on to the next cycle where we are currently recovering from a global pandemic. Expectations are that this recovery will not take as long as the last one, in part because of that underlying strength in the economy we experienced up until a few months ago. This new 2019 data quantifies just how strong the economy was.

* Note that poverty rates for Black Oregonians increased in 2019, following a large decline in 2018. Overall, given Oregon’s small Black population, the data is noisy from year-to-year and the margin of error is relatively large. In the big picture, poverty rates for Black Oregonians have improved but remain higher than for any other race or ethnicity.

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Posted by: Josh Lehner | September 15, 2020

Oregon Employment, August 2020

This morning we got the August 2020 jobs report from our friends at the Employment Department. Our office is working on finishing the next economic and revenue forecast, due out next Wednesday, September 23rd. As a result what follows are a few quick updates to the charts we have been tracking every month. Also stay tuned as this Thursday we will get the 2019 American Community Survey data. While Census data is always backward looking, it is even more so today given the pandemic and recession. That said it is always important to take stock of where we have been, and this dateset provides the best details available on the socioeconomic status of our community. Our office will offer some highlights later this week. Now on to the current state of Oregon’s labor market.

Job growth remained strong in August. The state added 11,300 jobs. Oregon has now regained 44% of its lost jobs. This is good news. The data is no longer apocalyptic; it’s just really bad. And while the economy overall is proving more resilient than expected, we still have a Great Recession sized hole left to fill. This will take time and growth moving forward will be slower. But these first few months of recovery have been encouraging.

One silver lining continues to be that much of the job loss and corresponding increase in unemployment still looks to be temporary. The headline unemployment rate is back down to 7.7%. The declines there are important and good news. That said, the core unemployment rate — a measure of permanent layoffs and damage — continues to be elevated. This is the part of the recovery that will take time, even as many of those on temporary layoff are recalled.

As always, a huge thank you to Tracy Morrissette over at the Oregon Employment Department for his great work digging into the detailed data so we can look at core unemployment in Oregon. Thanks Tracy!

Finally in a good news/bad news update, we continue to see a split in labor market outcomes. Low-wage industries suffered the most during the shelter in place phase of the cycle, given the sudden stop nature of the shutdown. It is here that much of the job growth in recent months is taking place. This is good news as those workers are brought back following temporary layoffs. The bad news is that middle-wage sectors are only seeing very modest gains and high-wage sectors are not seeing any growth in recent months. They may not have suffered as much to date, but they’re also not bouncing back. This is a concern and likely speaks to more permanent layoffs in these industries. Keep in mind that job losses of 5% are more severe than Oregon suffered in the 1973, 1990, and 2001 recessions.

All told, Oregon’s economy continues to recover and heal. Employment is up and unemployment is down. Stay tuned for more on the outlook and where the economy goes from here with next week’s forecast release.

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Posted by: Josh Lehner | September 9, 2020

Today’s Wildfires are Different

Unfortunately, in recent years our office has been researching the impacts of climate change and natural disasters much more than we’d like to. The combination of risks related to wildfires, droughts, the potential for climate refugees, let alone the specter of Cascadia, is increasingly important to acknowledge and discuss. Even so, today feels different. These fires are different.

 

The main difference today is the mounting physical destruction of property and evacuation of populated areas. In recent years much of our focus has been on the traditional economic impacts of natural disasters, but in other locations like hurricanes and flooding in the South, or the impacts of wildfires in scenic areas and short-term tourism disruptions. Right now we are getting the worst combination of these in Oregon. The fires aren’t just burning forests and filling our lungs with smoke. They are also destroying homes, businesses, and forcing large numbers of our friends and families to evacuate or be ready to do so at any moment. Additionally many major north-south and east-west connections through Oregon have been and/or continue to be closed, disrupting untold supply chains.

Whenever we find ourselves facing disasters, the most important issues aren’t economic in nature, they’re social and human. The lost lives, health concerns, and societal impacts are paramount, even as our office focuses more on the economics given our role. And while it is too soon to know the extent of damages from the current fires, what follows are a few thoughts and potential avenues for further research as we learn more.

Traditional Economic Dynamics

Natural disasters tend to impact regional economies, but rarely move the needle in terms of national data. Given that the entire West Coast is engulfed today this may potentially have bigger macro impacts than a single event like a hurricane. That said, the impacts are usually temporary in nature with the impacted region made economically whole within a year. Now, there are Katrina-sized exceptions and the losses are not evenly distributed across the impacted population and businesses.

The largest economic damage usually comes from the destruction of property (buildings, infrastructure, etc) which impacts the productive capacity of a regional economy. This destruction is not accounted for in GDP because GDP measures current production of goods and services. The burned houses, lost cars, and destroyed bridges were made years ago and counted for GDP growth back then. Perversely the rebuilding phase following a natural disaster does show up in GDP data as roads and homes are rebuilt. Furthermore, because we will rebuild using current products and technologies, the capital stock is somewhat enhanced or better off because we are replacing older equipment and buildings. Over the long-run this can support better growth and productivity moving forward.

We know our communities, particularly those along the McKenzie and Santiam rivers, and those south of Medford, have suffered significant damage already. Much of this will be rebuilt, and the traditional dynamics laid out above will apply. However a key question is to what extent we will fully rebuild all of our lost communities. There is a chance some of the damage will be permanent in that not all of the homes will be rebuilt, not all of the local businesses will reopen, and the like. Access to capital is key, in terms of financial assistance, disaster relief, a well-functioning insurance market, legal and regulatory forbearance, and so forth.

Additional Economic Impacts

In terms of the lost forests, there will be impacts on tourism and the timber industry. In terms of measuring the losses, the market value of timber is a natural place to start. Tourism impacts tend to be short-lived as travel rebounds fairly quickly in the months following disasters. On the other hand the timber industry impacts may be longer lasting as the fires may reduce the potential harvest levels for years to come.

The transportation disruption due to the wildfires will also bring significant costs, although they too are temporary. Closing major trucking routes delays shipments and disrupts supply chains. Local travel-related businesses in impacted areas lose gas, food, and accommodation sales, however some of these sales are picked up along alternate routes across the state that remain open.

Longer-Term Considerations

The scariest potential impacts for Oregon is that fewer households and investments may be attracted to the region moving forward. Oregon’s primary comparative advantage remains its ability to draw skilled workers away from other states. To the extent that local quality of life has been reduced, or if Oregon is perceived as a riskier or costlier place to live and do business, this advantage will be less pronounced. Increased risk lowers growth prospects due to uncertainty and higher costs. If these fears are realized, our office’s long-run outlook would need to be lowered.

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Posted by: Josh Lehner | September 3, 2020

New COVID-19 Data Tracking Page

Standard economic data like the monthly employment reports, quarterly GDP, and the like remain the best way to track what is happening in the U.S. and Oregon economies. However, COVID-19 and the pandemic has been moving so fast that trying to assess the current state of the economy is challenging with backward looking reports.

Our office has been tracking 10 real-time data points to help assess the current state of the pandemic and economy. Given our office expects this to be a multiyear recovery, we started a new page here on the blog. When in doubt we thought we should make this material easier for people to follow if they so choose.

You will find this new page at the top of where we have an “About” page and the new “COVID-19 Tracking” page. Or you can find it via a direct link here: https://oregoneconomicanalysis.com/covidtracking/ Our office plans on updating these charts every week or two. Given data release schedules, this will most likely happen on Thursdays.

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Posted in News

Posted by: Josh Lehner | August 27, 2020

COVID Challenges Working Oregon Parents (Graphic of the Week)

As a new school year begins here in the weeks ahead, I wanted to circle back on some work our office did at the start of the pandemic and repurpose it to highlight the challenges facing a sizable share of the workforce. There is no question that online learning impacts how students learn, how teachers teach, it also has economic and racial inequities when it comes to access to technology and the like. However one additional challenge is how parents need to juggle work and helping their kids with school at the same time. This is especially true when daycares and after school programs are limited due to the pandemic.

After digging into the Census data again, 1 out of every 6 Oregonians in the labor force fits the following description. They have kids, work in an occupation that cannot be done remotely, and do not have another non-working adult present in the household. In other words these 350,000 or so Oregonians are in a bind.

Of course this doesn’t take into account the numerous creative/stressful workarounds households come up with like adults working different shifts or hours, one adult (mostly moms) stops working all together to provide care, having friends or relatives help with the kids, etc. Even so we know this represents a sizable share of the workforce, and another COVID-related challenge to overcome at the micro (family) and macro (labor supply) level.

Finally, the impact across the income distribution here isn’t as big as I would have thought. In fact lower-income households have the fewest share of parents in a bind. Yes, lower-income households are more likely to work in occupations that cannot be done remotely. However lower-income households are less likely to have kids, and those that do are more likely to have another non-working adult living there. Those two factors more than offset the occupational mix of not being able to work from home.

It turns out that upper middle-income households — broadly speaking those in the $65,000 to $110,000 range — are the most impacted. The main challenge they face is not necessarily the ability to work from home, but rather they tend to be dual earner households and have the smallest share of non-working adults present.

Higher-income household parents are in a bind an average amount, in large part due to their ability to work from home given their occupational mix. And this leaves to the side any discussion on the potential for “pods” or hiring outside assistance and the like.

All told the pandemic is taking a toll on our lives, the economy, and the choices we face as a society. This intersection of COVID, working parents, and school is just one example.

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Posted by: Josh Lehner | August 25, 2020

Checking in on Oregon’s Regions, July 2020

This morning the Oregon Employment Department released county level data for July 2020. I thought it might be useful to take a quick look at how the initial stages of recovery are shaping up across the state. Keep in mind that this is predominantly preliminary data that will be revised and benchmarked in the months ahead. That said, looking at the high level data now does give us indications of the severity of the recession and strength of the recovery so far.

While I do not normally like to mix business cycles on the same chart like this I found it particularly impactful as I have been updating my files. The fact that rural Oregon, just before the pandemic hit, had finally returned to its employment levels seen prior to the Great Recession was a reason for celebration. However, the number of jobs across rural Oregon today is now the same as it was at the depths of the Great Recession. On the other hand, even with severe COVID-related job losses, urban Oregon’s strong job growth last expansion means there are still more jobs today than during the mid-aughts.

Now, urban Oregon and rural Oregon are not monoliths. There is tremendous variation across our communities that gets masked over when looking at these very high level cuts of the data. Even looking regionally, it is clear that parts of rural Oregon have seen more significant losses than others. In particular, job losses along the North Coast and in the Gorge (Hood River) were the most severe. On the other hand much of eastern Oregon has seen less severe losses, although nowhere is unscathed. Among urban areas the Rogue Valley is seeing better labor market readings, while the Portland area is a bit worse.

Finally, this last chart looks at the counties individually and shows how severe the initial shock was in dark blue, and how jobs current stack up to pre-recession levels in light blue.

Bottom Line: Across the state the economy is healing following the initial stages of the pandemic. The data will be revised some moving forward. Once it is, we will be better able to dig deeper and examine the severity across sectors for the different regional economies in the state. But for now this data provides a good, high level look at current state of the labor market. For more see our previous work for thoughts on the local level outlook, and the impact of federal programs like the PPP. We also have been working on local estimates of the impact of the household recovery rebates and expanded unemployment insurance benefits which we will share in the weeks ahead.

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Posted by: Josh Lehner | August 18, 2020

Oregon Employment July 2020

This morning we got the July 2020 jobs report from our friends at the Employment Department. July brought another good month in terms of adding jobs and unemployment declining. The recovery still looks good as of last month, even if the pace of the recovery did slow some from May and June. Even so the economy remains in a deep hole. The current state of the labor market in Oregon is about as bad as it was at the worst of the Great Recession. The data is no longer apocalyptic, or nearly so. It’s just really bad.

One silver lining continues to be that much of the job loss and corresponding increase in unemployment still looks to be temporary in nature. Or at least that’s how it’s showing up in the survey data. Oregon’s headline unemployment rate has dropped more than 4 percentage points since April. That means it is about 40 percent of the way back to where it was pre-COVID. That said, Oregon’s core unemployment rate ticked up a bit in July. This measure excludes those on temporary layoff and includes folks who have recently given up looking for work. July’s increase is one indication that the amount of permanent damage, while still relatively small, isn’t seeing improvements like the headline rate suggests.

*As always, a huge thank you to Tracy Morrissette over at the Oregon Employment Department for his great work digging into the detailed data so we can look at core unemployment in Oregon. Thanks Tracy!

Over on Twitter dot com, Jed Kolko — Indeed’s chief economist and creator of the core unemployment rate concept — notes there are some big differences in changes in the headline vs core unemployment rates across different groups. Specifically Jed finds that while the headline unemployment rate increased the most for those with lower levels of educational attainment, the core unemployment rate has increased the most for college graduates.

That brings us to the industry pattern of employment we are seeing here in Oregon.

We knew the recession would hit a lot of the service sector the hardest, given the shelter in place style policies and social distancing. These industries — bars, restaurants, hotels, nail salons, gyms, some forms of retail, etc — tend to be lower-wage sectors. As the economy reopened and households and businesses grew more comfortable and confident, some portion of these lost jobs would come back relatively quickly. After that our office thought we would see slower growth until the pandemic is managed and brought under control. That’s the underlying nature of the Square Root Recovery. Our biggest concerns have been on the amount of economic damage that builds up in the form of business closures and permanent layoffs.

Keep in mind that we are still only a few months into this cycle. The data is still preliminary and has not been benchmarked. But so far it is clear that the lower-wage sectors have borne the brunt of the recession to date. It is also among these sectors where the rebound in growth is occurring, as expected.

On the other hand, middle- and high-wage sectors have seen sizable declines in employment and no real rebounds. Make no mistake. While the job losses in these industries are not as severe as those among the low-wage sectors, they are still quite large. Look at the first chart above. Job loss of 5% or so is worse than Oregon experienced in the 1973, 1990, and 2001 recessions. What is a bit more concerning is the lack of growth in recent months. It is still early and this is preliminary data. However this could be one aspect of that permanent damage we are concerned about. And it speaks directly to Jed’s finding that the core unemployment rate has risen the most for college graduates, who tend to work in the higher-wage industries.

Bottom Line: Oregon’s economy continues to recover over the summer. Employment is up and unemployment is down. Overall the state has regained about 40% of it’s lost jobs due to COVID. The economy is doing noticeably better than expected. This is good news and what matters most today. And while I hate to be a bit of a downer, it does only take a little digging beneath the surface of the data to paint a potentially worrisome picture. When combined with the worse public health situation, and lapse in federal assistance, it makes the outlook uncertain. As always our office will continue to monitor the data. We are currently developing the next economic and revenue forecast, due out September 23rd, and meeting with out advisors in the near future to discuss.

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Posted by: Josh Lehner | August 13, 2020

Let’s Talk More about Pandemic Migration and Working from Home

There continues to be a robust discussion around pandemic migration and working from home. Following our office’s most recent forecast for population growth, in addition to our updated report on Working from Home and new outlook for housing, I wanted to circle back and flesh out a few things.

First, a confession. I am basically on the record being a wet blanket to many of these discussions. I am also on the record saying I believe these are all upside risks and I hope I am wrong. One reason is that we rarely see massive shifts in things like population growth, particularly boosts to migration during recessions. The 1990 recession being the only prominent example in Oregon.

A second reason is that good, solid data remains a long ways off. All discussions to date are speculative. We won’t get 2020 ACS data until late September 2021, more than 13 months from today. We won’t get 2020 Oregon population estimates from Portland State until November 2021, some 15 months away. And this is to say nothing of the official 2020 Census numbers which serve as a key anchoring point to all of our demographic discussions. We don’t know how they will turn out given the pandemic and the, shall we say, lackluster administrative support. But between now and when we get good data, we will be scouring around for all relevant data. Please pass along anything you find useful! That said, we know most of the available data paints an incomplete picture at best. It will take a host of data points to try and fill in the gaps.

With that said, let’s take a couple looks at home sales. A lot of discussions point toward strong sales as an indicator of pandemic migration. No question home sales are a measure of housing demand and tend to be pro-cyclical, just like migration. But simply saying home sales are up isn’t quite the same thing as saying population growth is accelerating, which is really what a lot of the discussions I find myself in are actually trying to say. That may be the case. We just don’t know.

The key here is that migration generally slows in recessions. People follow the jobs. As job opportunities dry up, folks stop moving. So any pandemic migration would need to be strong enough to offset this normal cyclical pattern to show that 2020 population growth was faster than 2019. To our office, that seems like a heavy lift.

Specifically I am now tracking a few things. Send me your suggestions (and better yet any data sources) for additional items to track. The first is trying to parse out the city vs suburbs debate about people fleeing cities in search of more space to avoid the virus. As City Observatory has detailed, to date there is no indication this is happening. In the Portland region, home sales do not yet indicate a shift in preferences for the City of Portland versus the suburbs.

The second thing I’m tracking are home sales in a few popular, scenic areas. Bloomberg’s Conor Sen has a good article on remote work and housing in so-called “Zoom Towns.” Potentially this could be an indication of pandemic migration to smaller metros and/or rural areas. So far in the housing data we know that home sales have been strong in recent months. The key question is how much of the strength is simply making up for the weak spring when we were sheltering in place.

The year-to-date (YTD) numbers are solid, but not yet spectacular, in Bend and Missoula. In fact home prices are up ~6% in Bend and ~8% in Missoula, which is right in line with appreciation in 2018 and 2019. Given the very low inventory levels, I would expect these prices to continue to rise, but I am more interested in the number of sales over the course of the remainder of the year. Will they level off and show solid gains when the dust settles, or will they increase considerably due to pandemic migration?

Finally, I wanted to follow-up on some of the working from home discussions. I would recommend this Brynjolfsson et al paper, plus further research from Adam Ozimek at Upwork on the future of remote work, and Derek Thompson in The Atlantic on future workforce changes and their implications. Overall there is possibly a much larger change underfoot than many expect, myself included.

Adam’s report shows that businesses are finding remote work to largely be going better than expected and future expectations of telecommuting to increase. As such I thought it might be useful to take some of the new research and adjust it to the standard Census data we have. We know that the Census data is an undercount as some remote workers do so from co-working spaces, coffee shops and the like, plus a number of folks telecommute one or two days a week. Even so, doing a very rough projection based on the historical Census data and the new surveys yields something like the following. As out office noted the other week, remote work and working from home more broadly is a long-run growth opportunity, possibly an even more significant one than we expect.

These are important discussions to have and important topics to follow. Even as it will take some time before the good, solid data is available, our office will continue to track what information is available.

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Posted in Demographics, Housing, Miscellaneous, News

Posted by: Josh Lehner | August 7, 2020

Income, Spending, and an Uncertain Outlook (Graph of the Week)

To date the economy is a paradox in the sense that it is clearly in bad shape but also performing better than expected. One big reason for this better-than-expected economy is federal assistance. In particular the CARES Act provided support for small businesses, households, and laid off workers. This federal aid put a floor under the recession and kept firms and households afloat in recent months. In fact, while underlying personal income has dropped roughly as much as it did during the Great Recession, the federal assistance so far has more than made up for that loss. Total personal income is actually up in recent months which means households are able to pay bills, and spend money if they want to, or feel comfortable enough to do so. New data finds that total household debt in the U.S. went down last quarter, primarily due to credit cards being paid off (probably due to more income and less spending). Encouragingly student loan delinquencies plummeted as well, and there was a large increase in households who were behind on their mortgages being able to catch up and become current. Furthermore we know that bankruptcy filings are also down in recent months.

However the key question has always been what happens once that federal assistance runs out? The Paycheck Protection Program (PPP) loans/grants were originally designed to last 8 weeks, the one-time recovery rebates were mostly issued in April, and the expanded unemployment insurance benefits expired at the end of July. The CARES Act did it’s job, but unfortunately the pandemic is still raging. The economy needs more help to tide firms and households over until the public health crisis is managed and brought under control.

Our office is beginning to work on our next forecast, due out September 23rd. We are developing the preliminary forecast and meeting with our advisors here in a couple of weeks. The good news is that the economy is clearly doing better than we expected in recent months. In fact the economy is more in-line with our optimistic scenario from our most recent forecast. However the state of public health and uncertain federal policy is more in-line with our office’s pessimistic, double-dip scenario. Plus there are numerous indications that the economy has stalled out over the summer, everything from leveling off in restaurant demand, to ongoing large numbers of initial claims for unemployment insurance, to slower job growth in July. So far the data is shaping up like the Square Root Recovery, albeit on a faster timeline. How all of this affects the forecast is still a work in progress. The starting point of the recovery is better, but the outlook, if anything, is more uncertain.

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Posted in Income, Miscellaneous, News, Revenue, State Comparisons

Posted by: Josh Lehner | July 28, 2020

COVID-19 and Oregon’s Housing Outlook

This morning I am presenting a mid-year forecast for the Home Builders Association of Metropolitan Portland. A summary of my thoughts and a copy of my slides are below.

Due to the severe recession and pandemic, our office’s initial expectations were for housing and construction to see significant declines. Normally in a recession household formation weakens and incomes sag. However to date that has not happened. Housing has been stronger than most sectors overall. I think there are three main reasons for this strength in housing demand.

First is the nature of the cycle. If we’re being honest, it is clear that low-wage workers have borne the brunt of the pandemic and recession to date. High-wage and higher income households have fared better, and are predominantly homeowners.

Second are interest rates. Mortgage rates remain at or near historic lows. This keeps affordability issues at bay, and allows buyers’ budgets to expand. The outlook calls for low interest rates for years to come. The Federal Reserve is signalling they will not raise interest rates until the the economy is strong and actual inflation picks up.

Third is the big demographic tailwind for housing. In the decade ahead, Millennials will fully age into their 30s and 40s which are prime home-buying years. By one’s mid-30s in Oregon today we see a 50-50 split between owners and renters. Early 30s are a key cohort for first-time buyers, while early 40s are a key cohort for overall spending on housing (move-up buyers, young families furnishing homes, etc).

Now, while these strengths may be more structural in nature, uncertainty and risks remain.

The biggest risk remains the pandemic itself. There is no trade off between public health and the economy. It is not either/or. It is neither or both. And right now the worsening health situation increases the possibility of more permanent economic damage, a slower recovery, or even a double-dip recession.

As the recovery drags on — it may feel like years already, but we are actually only a few months into this cycle — it will likely weigh on household incomes and confidence. Some of the normal recessionary dynamics are likely to emerge. This will push back on those reasons for strength and optimism a bit.

Finally a wild card is working from home. There is a lot of speculation about how we will permanently alter our lives due to the pandemic. However it is much too soon to tell how it will shake out. It is possible that Oregon does see COVID-related migration, although unlikely to fully neutralize the cyclical swings this year or next. And household preferences may increase for single family homes, or larger homes, or ones with offices so they are better able to telecommute. To the extent any of that occurs, it would increase industry demand.

All told housing and construction are likely to be economic strengths in the years ahead. Housing is historically a leading economic indicator. Now, that doesn’t meant the industry isn’t impacted. Expectations should be for a couple soft years instead of large declines. The reason is those structural factors should be strong enough to offset some of the cyclical weaknesses.

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